Plenary Session: Varieties of Financialization of Housing – ADP Sponsored
Organizer: Jie Chen (School of International and Public Affairs, Shanghai Jiaotong University)
The financialization of housing is a fundamental element in the financialization of urban built environment and critical to the overall financialization. This panel will bring together the discussions of the driving forces and various forms of housing financialization from different institutional contexts of both global south and global north. Particularly, the panelists would share the views from western mature advanced capitalist economy where housing financialization primarily works as an outlet to absorb surplus capital from the primary circuit of capital, as against the views from China where housing financialization actively contributes to the accumulation of capital.
The Uneven and Combined Financialization of Housing
Manuel B. Aalbers, Professor, Division of Geography & Tourism, KU Leuven, the University of Leuven
Since the 1970s, mortgage markets have been transformed from being a ‘”facilitating market” for homeowners in need of credit to one increasingly facilitating global investment. Likewise, subsidized rental housing has become exposed to global financial markets through the use of social housing bonds and financial derivatives as well as through the rise of financialized landlords such as private equity firms and real estate firms listed at the stock exchange. In other words, housing is increasingly financialized. Yet, the financialization of housing in the Global South (GS) develops in different ways than in the Global North (GN) because the mechanisms underlying and pushing financialization are fundamentally different. Subordinated and dependent financialization in the GS is the contemporary form of uneven and combined development, shaped by the financialization of the GN. The recycling of GN liquidity in countries lower in the global money hierarchy has contributed to the growth of mortgage lending in the GS. With the macro-comparative perspective in our paper we provide a toolbox that not only helps us to rethink the relations between GN and GS in shaping distinct patterns of uneven and combined financialization, but also to rethink the varieties of capitalism and residential capitalism approaches.
Financializing multi-family rental housing in Canada
Martine August, Assistant Professor, School of Planning, University of Waterloo
After twenty years of private and public disinvestment in affordable multi-family rental housing in Canada, new financial vehicles began to target ageing towers in the 1990s, with the first Real Estate Investment Trust (REIT) in the field proclaiming “Apartments make money!” on the cover of their 1999 annual report. This paper explores how financialization is remaking the apartment sector in Canada and how these changes matter for tenants, communities, and patterns of social and spatial inequality. In just two decades REITs have rapidly acquired apartments, and have gone from holding zero to ten percent of privately-built multi-family suites nation-wide, while financialized landlords more broadly own 18% of the nation’s stock. This paper examines the profit-making approaches of financialized landlords, and proposes a three-part typology geographic and investment strategies adopted in Canada, from resource-oriented boom towns in the far north, to mobile-home parks on the east coast, to gentrifying communities in Toronto’s hot property market. This process advances by transforming multi-family housing suites into financial assets, which remakes the multi-family sector into an investment product for domestic and international capital, and which “accumulates by dispossession,” extracting greater value from tenants and deploying business models based on displacement.
The Chinese way of housing financialization
Fulong Wu, Chair Professor, Bartlett School of Planning, University College London
While the literature of the financialization of housing predominantly refers to mortgaged and securitized homeownership and the penetration of capital into subsidized rental housing, the form of financialization is variegated. In China, housing commodification and privatization have led to the prevalence of homeownership. The financialization of housing is characterized by making owner-occupied housing a major financial asset for households’ wealth. Despite a still relatively low level of housing mortgages, both the absolute volume of mortgages and the proportion in GDP are rapidly rising. Housing value appreciation has driven a significant increase in financing housing consumption through multiple channels. This paper discusses these sources and suggests that housing is financialized to form a critical link in China’s overall development model. This paper argues that the essence of housing financialization in China is not mortgage securitization but setting up a ‘mainstream financial platform’ upon owner-occupied housing as financialized assets, through which Chinese economies are financialized, despite an underdeveloped financial market.